• India ranks poorly on multiple health financing indicators. Its public health expenditure as a percentage of its GDP (1.28%) and share of general government expenditure dedicated to health (4.8%) remain akin to the poorest countries.
  • Per capita health spending growth has not kept pace with rising incomes. Private spending still constitutes nearly 60% of overall expenditure on health.
  • This is driven by the dominant role of the private health sector. Yet, the discourse on addressing high healthcare costs remains limited to what the government can do to share the personal expenditure burden.
  • It automatically becomes an issue of increasing government spending to reduce personal spending.

Dispersed sector

  • The private sector in India is inexorably dispersed, with marked inequities between rural and urban areas and widespread market failure.
  • Creating organised networks of providers like health maintenance organisations (HMOs), which can be regulated easily, has been envisioned in recent policy pronouncements.
  • However, unlike in the U.S., where managed care models arose in response to cost pressures, the typical Indian context of income disparities, backwardness, and under-regulation incentivised the private sector to differentiate into a host of organisations of varying sizes and scopes, each serving its own customer base.
  • These often provide care at apparently inexpensive rates but of dubious quality. Such contexts offer few natural incentives for consolidation.
  • Achieving this solely through public health insurance is a mammoth task.
  • In such a scenario, initiatives that seek to make private healthcare more affordable without affecting care quality assume importance.
  • This is likely to encompass a wide range of policy instruments that alter the operating conditions of the private sector. Moreover, such policies have to be enshrined in our national health policy.
  • This should not be confused with driving public funds into public-private partnerships.
  • Rather, we need overarching policies that drive down private healthcare costs even for the self-paying consumer with little or no government subsidy.
  • Public health insurance schemes have often been reproached for imposing unreasonable package rates on empanelled private providers with a weak regard for actual costs of care.
  • A good start can be made by incentivising and propagating many business process innovations (BPI) that lie scattered across the healthcare landscape such as the cost-reducing innovations by Aravind Eye Clinic and Narayana Hrudayalaya.
  • Such BPIs are confined to a few philanthropic organisations and find little mainstream policy or research attention. Again, while the healthcare ecosystem does not naturally incentivise such innovations, regulatory and economic policy signals can be facilitative.
  • There is already an emergent drift towards value-based healthcare, which seeks to improve patient outcomes for the money spent.
  • Task shifting in healthcare is an evidence-backed instrument to hold down costs, especially in under-resourced settings. The National Commission for Allied and Healthcare Professions Act, 2021 can be a boost in this direction.
  • Widening the ambit of practice of nurses and allied personnel should be a strong emphasis of health policy, along with concurrent mainstreaming of such practice roles across the private sector.
  • Healthcare provision in cities bespeaks the stark market failure in healthcare. The booming number of providers in cities has only served to drive prices up, but this is no necessary evil. For instance, some countries like Canada have conceived regional health boards that organise care equitably within regions, exploit economies of scale, and bring down healthcare costs.
  • Such boards should have adequate representation from communities and enough power to determine local policy and resource allocation, impose caps on the maximum number of healthcare providers, and build working networks of care.
  • They can address many health system maladies. Creating affordable and effective private health insurance products is another important option.

Double whammy

  • The Indian healthcare story has seen a double whammy of regulatory infirmity and unfulfilled economic promises.
  • We cannot go soft on the former even as the latter continues to falter. For instance, many States have their own Clinical Establishments Acts that are stuck short of full implementation. Strong political will and the purging of unnecessary restrictions is needed to allay resistance.
  • The high costs of medical education trigger cost recovery through resource-intensive ways of practice.
  • While multiple steps to reduce entry barriers in medical education have been taken lately, medical education costs have sharply increased over the past decade or so. This warrants policy attention.
  • While we endeavour to make private healthcare more affordable, caution must be exercised that it doesn’t substitute adequate public spending on health.
  • No country in the world has ever achieved universal healthcare through predominantly private means
  • Affordable private healthcare must only come to supplement strong public healthcare, while in turn having a complementary effect in enhancing the efficiency of government health spending.


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